Drawback

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Drawback, also known as duty drawback is the refund of certain duties, taxes, and certain fees collected upon the importation of merchandise. Refunds are only allowed upon the exportation or destruction of the imported merchandise, a certain manufactured article, or a valid substitute. Drawback was established in 1789 in order to promote exports and manufacturing within the U.S. market. Claimants may be the importer, exporter, or other party within the drawback transaction.

Duty drawback can help a claimant recover the following duties, taxes and fees paid on the imported merchandise:

  • Regular duties paid on an entry
  • Voluntary tenders of duties
  • Marking duties
  • Certain excise taxes
  • Harbor maintenance fees
  • Merchandise processing fees
  • Oil Spill tax
  • Duties tendered as a result of a 19 U.S.C. 1592(d) duty demand
  • Duties tendered in a prior disclosure per 19 C.F.R. 162.74
  • Trade Remedy duties collected under sections 201 and 301 of the Trade Act of 1974 (P.L. 93-618)
  • Other miscellaneous fees as authorized by CBP

Most Common Types of U.S. Drawback[edit]

  • Direct Identification Manufacturing Drawback (19 U.S.C. 1313(a)): Upon the exportation or destruction under customs supervision of articles manufactured or produced in the United States with the use of imported merchandise, provided that the manufactured articles have not been used prior to exportation or destruction, drawback of 99% of the duty, taxes and fees paid upon importation may be claimed.
  • Substitution Manufacturing Drawback (19 U.S.C. 1313(b)): If imported duty-paid merchandise, or merchandise classifiable under the same 8-digit HTS subheading number as such imported merchandise, is used in the manufacture or production of articles in the United states, upon exportation or destruction of the manufactured articles, notwithstanding the fact that none of the imported merchandise may actually have been used in the manufacture or production of the exported or destroyed articles, and only if the manufactured articles have not been used prior to such exportation or destruction, drawback of 99% of the duty, taxes and fees on the value of the imported or substituted merchandise, which ever is less, may be claimed.
  • Rejected Merchandise Drawback (19 U.S.C. 1313(c)): If merchandise is exported or destroyed because it does not conform with samples or specifications, has been shipped without the consent of the consignee, determined to be defective as of the time of importation, or imported and sold at retail and returned, then 99 percent of the duties which were paid on the merchandise may be recovered as drawback. Prior to the export or destruction of the imported merchandise, claimants must notify CBP of the export or destruction by filing CBP Form 7553 with CBP Officers at the port of examination, unless specifically exempted from this requirement.
  • Unused Direct Identification Drawback (19 U.S.C. 1313(j)(1)): If imported merchandise is unused and exported or destroyed under Customs supervision, 99 percent of the duties, taxes and/or fees paid on the merchandise by reason of importation may be recovered as drawback. Prior to the export or destruction of the imported merchandise, claimants must notify CBP of the export or destruction by filing CBP Form 7553 with CBP Officers at the port of examination, unless specifically exempted from this requirement.
  • Substitution Unused Merchandise Drawback (19 U.S.C. 1313(j)(2)): If merchandise that is classifiable under the same 8-digit HTS subheading number as the imported merchandise, provided the HTS description of the imported merchandise is not "other," is exported or destroyed without being used in the United States, drawback of 99% of the duty, taxes and fees on the value of the imported or substituted merchandise, which ever is less, may be claimed. If the 8-digit HTS description of the imported merchandise is "other," drawback may be authorized if the substituted merchandise is classifiable under the same 10-digit HTS subheading number as the imported merchandise provided the 10-digit HTS description of the imported merchandise is not "other." Drawback under § 1313(j)(2) is limited when exporting to Canada and Mexico. Prior to the export or destruction of the merchandise, claimants must notify CBP of the export or destruction by filing CBP Form 7553 with CBP Officers at the port of examination, unless specifically exempted from this requirement.

Trade Information[edit]

U.S. Duty Drawback. For U.S. drawback, drawback claims are submitted to one of four drawback offices for processing: Newark/New York, Houston, Chicago, or San Francisco. Claimants may file at any office regardless of the port of import. Claims are paperless and must be filed electronically through CBP's Automated Broker Interface (ABI). Claimants are required to provide the data defined in the drawback CATAIR, which can be found on CBP.gov. General instructions can be found on CBP.gov in the ACE Business Rules, section 14. Claimants may self-file, use a licensed Customs Broker to file, or utilize a service provider. Brokers, service providers, and ABI software vendors can be found on CBP.gov.

Notice of Intent to Export (NOI) for Unused Merchandise. Per 19 C.F.R. 190.35, exporters are required to notify U.S. Customs and Border Protection (CBP) prior to the export or destruction of unused, rejected, and destroyed merchandise subject to drawback. Notification is made by submitting CBP Form 7553 to the CBP office of examination, which is usually the port of export/destruction. Once the requirements of the NOI have been met, the merchandise may be exported/destroyed, and the executed Form 7553 is included with the drawback claim. The requirements in 19 C.F.R. 190.35 may be waived per the conditions outlined in 19 C.F.R. 190.36 or 19 C.F.R. 190.91.

Public Law 114-125[edit]

On February 24, 2016, the President signed Public Law 114-125, which enacted the new duty drawback law HR 644 “The Trade Facilitation and Trade Enforcement Act of 2015” (TFTEA) which modernized the drawback statutes and regulations.

The new duty drawback law (HR 644) provides extensive opportunities in nearly every segment of the U.S. economy for refunds on imported goods that are then exported.

References[edit]

U.S. Statutory Reference: 19 U.S.C 1313

U.S. Regulatory Reference (TFTEA): 19 C.F.R. Part 190